Affymax (AFFY +0.00%) received its first Food and Drug Administration approval last spring with Omontys for anemia in dialysis patients. The drug enters a war against Amgen's (AMGN 0.44%) Epogen, which has held a near monopoly for over 20 years.
As its lone product enters the market, what's next for Affymax?
Let's make a deal
Why would doctors prescribe Omontys over the better-known Epogen? Omontys' once-monthly injection offers dosage advantage over the older drug, which has a regimen that can exceed a dozen doses per month. Epogen has also drawn safety concerns as of late. And Omontys offers a better price for treatment providers pressed by the new Medicare reimbursement rules.
But victories in this market come from deals with dialysis centers. The companies have to slash prices to obtain the deals but in exchange have their drug easily distributed to the core patient group.
Fresenius Medical Care (FMS 1.47%) and DaVita (DVA +0.63%) combined form about 60% of the dialysis center market. Amgen has a "multi-year" deal in place with Fresenius and a seven-year deal with DaVita. Neither blocks Affymax getting its foot in those doors, but that's less likely for the near future.
Affymax secured a short-term deal with Fresenius last year that expires in April. The company hopes to expand that contract for the longer term, but we'll see if that happens and what percentage of customers would end up on Omontys rather than Epogen.
Amgen's DaVita contract stipulates that the center will use Epogen for 90% of its patients. Affymax still plans to evaluate its chances. But Omontys does better with the mid-sized dialysis organizations, or MDOs. The company has deals in place with five of the six MDOs, including the newly struck agreement with DSI Renal.
The road ahead
Affymax will kick off a series of post-market studies this year with data reporting beginning in 2016. These will include a series of pediatric trials and an observational study tracking long-term efficacy and safety.
The European Medicines Agency accepted Omontys' marketing authorization application last year, but Affymax and partner Takeda await a final decision. Takeda bears the responsibility of development abroad, with Affymax in for half of the royalties.
On the financial front, Affymax will split U.S. profits with Takeda. Affymax will book commercialization expenses and a profit equalization payment from Takeda that come from Takeda booking the top-line sales. The third quarter report -- the drug's first full commercial quarter -- showed $15 million in sales.
Foolish bottom line
Affymax's up more than 200% in the past 12 months. That kind of growth can't continue long-term, but there's still potential with Omontys. Epogen falls off patent in 2013, and Roche already has a biosimilar in development. The big signs of confidence for Affymax will arrive via long-term contracts with Fresenius and/or DaVita. But those could be years down the line.
